You're not too far off from accomplishing your basic goal, which is to display the categories and sub-categories in an optgroup.

You can either:

1. Query MySQL with two separate queries and combine them using PHP against both the SubCategory and Category tables.

2. Perform two foreach loops, each containing an optgroup for the respective Category and SubCategory results.

or

1. Query MySQL with one query using OUTER JOIN to retrieve one result set against both the SubCategory and Category tables (possibly even a UNION).
2. Perform two foreach loops, each containing an optgroup for the respective Category and SubCategory results, but only display the Category results if it came from the Category table and vice versa.

Here's some reference material:

MySQL Joins: https://www.sitepoint.com/understanding-sql-joins-mysql-database/

MySQL Union: Combining the results of two separate MySQL queries

PHP Foreach loop: http://php.net/manual/en/control-structures.foreach.php

PHP Array Merging: http://www.w3schools.com/php/func_array_merge.asp

<select  class="form-control" id="subcategory" name="subcategory" required>
<?php
$categories="SELECT Name,Category FROM SubCategory ORDER BY Category ASC, Name ASC;";
$query_categories=mysqli_query($connh,$categories);
$category_name_old = '';
while($rows_categories=mysqli_fetch_array($query_categories)){

    if($rows_categories['Category'] != $category_name_old) {
        echo "<optgroup label=".$rows_categories['Category'].">";
        echo "<option>".$rows_categories['Name']."</option>";
    }
    else {
        echo "<option>".$rows_categories['Name']."</option>";
    }
    $category_name_old = $rows_categories['Category'];
    if($category != $category_name_old) {
        echo "</optgroup>";
    }
}  
                                                                    } 
?>
</select>

You can do like this

Create an array with your main categories, with subcategories as a sub-array.

<select  class="form-control" id="subcategory" name="subcategory" required>
<?php
$option_list = array();

$categories="SELECT Name,Category FROM SubCategory ORDER BY Category ASC, Name ASC;";
$query_categories=mysqli_query($connh,$categories);

while($rows_categories=mysqli_fetch_array($query_categories)){  
    $option_list[$rows_categories['Category']][] = $rows_categories['Name'];
}

// this is what we're aiming for
// $option_list = array("Maincat1"=>array("subcat1","subcat2","subcat3"),"Maincat2"=>array("subcat4","subcat5"));


foreach($option_list as $maincat=>$subcats){
    echo "<optgroup label='".$maincat."'>";
    foreach($subcats as $subcat){
        echo "<option value='$subcat'>$subcat</option>";
    }
    echo "</optgroup>";
}
?>
</select>

<?php
$conn = mysqli_connect($mysql_hostname, $mysql_user, $mysql_password,$mysql_database) or die("Could not connect database");
$result = mysqli_query($conn,"select distinct Category from SubCategory");
echo '<select  class="form-control" id="subcategory" name="subcategory" required>';
while($row = mysqli_fetch_assoc($result)){  
    echo '<optgroup label="'. $row['Category'] .'">';
     $data =  mysqli_query($conn,"SELECT Name,Category FROM SubCategory where Category = '".$row['Category']."'");
while($value = mysqli_fetch_assoc($data)){  
    echo '<option>'. $value['Name'] .'</option>';
}
 echo '</optgroup>';
}
echo '</select>';
?>